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I’m on record in predicting that we’ve hit peak graduate student debt.
Never in the history of the universe has anyone ever won a bet by wagering that anything about the cost of higher education would go down. So if I’m right, this would be a first.
My prediction that the future will bring less graduate student debt is, in reality, an argument that the master’s degree is getting cheaper. In that piece, I explain why the total investment that students must make to receive a master’s degree is likely to go down.
The first argument is that online learning is on the ascent. It may be that an online master’s is no less expensive in tuition and fees than its residential counterpart. Anyone who has ever designed and run an online degree program knows how costly it is to do this well. The argument for less student debt hinges on the observation that most online master’s students are also full-time working professionals. They are learning while earning. Those wages can hopefully replace some of the loan burdens.
The second argument that I make is that the diffusion of low-cost online scaled degree programs will have a measurable effect on the overall master’s degree market. It may not be that this new crop of affordable online degrees will enroll enough master’s students to move the debt needle. Instead, these new degrees—be they a $24,000 M.B.A. or M.P.H.—will put downward pricing pressure on the entire master’s program ecosystem.
How might this prediction be wrong?
1. Master’s Degree Prices and Graduate Student Debt Are Two Different Things
Even if the average price for master’s degrees starts going down (a very debatable assertion), it does not follow that average graduate student debt will head in the same direction. First, there are many other graduate degrees than master’s degrees. Medical and law schools are not going online, and they are certainly not offering low-cost scaled online degrees.
More importantly, graduate school debt is held by graduates at every age level. Newly lower-priced master’s degrees do nothing to help those paying off debt from the high-cost programs from which they have already graduated.
2. New Online Master’s Degrees Will Push Up Demand for These Programs, Leading to More Overall Student Debt
I may be getting the relationship between online learning and debt exactly backward. Online education reduces the friction of matriculating into a master’s program. The ability to continue working while receiving that degree will drive up the demand for online programs.
As student debt is cumulative, combining undergraduate and graduate debt, more students participating in more master’s degree programs will inevitably drive higher levels of overall student debt.
3. The Cost for Online Master’s Programs Will Increase as Marketing and Recruitment Costs Climb
Want to hear something crazy? Online degree program directors now need to plan to spend about 20 percent of tuition revenues on marketing. That’s right. The cost of bringing online master’s students in the door is driving up the price of a master’s degree by 20 percent. An online degree program that costs a student $50,000 will instead cost $40,000 if the marketing costs are removed. This is insane, as most of those online program marketing dollars add to the bottom lines of the companies that need the money least. Higher education is now subsidizing big tech. We are part of the tech windfall for Alphabet (Google Ads), Microsoft (LinkedIn) and Meta (Facebook).
As the number of online programs grows, the competition for students is increasing. This trend drives up marketing costs as more schools are competing for leads. Where this will stop, nobody knows. Already, nondegree online program providers will often spend 40 percent of revenues on digital marketing for “customer acquisition.” Digital marketing costs could very well drive up online master’s degree prices, causing graduate student debt to keep growing.
4. Low-Cost Scaled Online Programs Will Continue to Be a Niche Offering
I’m enamored with the potential to bend the educational cost curve by introducing scaled online programs. The way that scaling online programs work to save money is that they break apart the traditional educational delivery model. The various components of the educational bundle are separated and optimized.
Professors—the subject matter experts—are utilized primarily to develop and deliver educational content. Facilitators bring presence, interaction and feedback to the learning experience. Coaches work with students to help them navigate the program. Peer interaction and social learning are designed into the programs instead of bolted on to traditional pedagogical methods.
Designing for quality at scale is challenging. This is a highly resource-intensive endeavor to get right. It may be that universities choose not to make those investments to build quality scaled online programs. Most colleges and universities do not have the staff and bandwidth to do what it takes to design for scale.
5. OPMs
There is a risk that the rise of the online program management industry will result in higher degree prices and, therefore, higher student debt. There are many good reasons for a school to partner with a company in launching an online program. The OPM company provides the up-front money to develop, design, launch, market and support the program. This money derisks the online program for the school. Working with an OPM allows universities to go to market more quickly and to have greater confidence that their online master’s will bring in enough students and revenues. An OPM provider will only invest in an online degree program that they think will do well—and OPMs are very good at doing market research.
However, what might be beneficial for the school may not be optimal for the student. Traditional OPMs work on a revenue-share model, and they seek to optimize for total revenues, not lower student prices. Traditional OPMS are very good at digital marketing and recruitment. They are able to drive demand for programs. Prospective students may be convinced that the ROI for taking out student loans is worthwhile in terms of future career earnings and promotions.
More master’s students in traditional high-cost online master’s programs will drive up student debt levels. The rise of nonprofit/for-profit partnerships in higher education may be part of the reason for our growing student debt crisis.
Why else might I be wrong that the future will bring lower-priced master’s degrees and eventually less graduate student debt?
